How the ACA Affects Healthcare Providers

When the deadline arrived for uninsured Americans to sign up for healthcare insurance under the Affordable Care Act (ACA), the tally was a sharp turnaround from the troubled beginnings of enrollment last fall. According to President Obama, eight million Americans purchased insurance during the six-month sign-up period, achieving the results that congressional budget analysts had first anticipated. That tally is based on the number of people who enrolled for coverage by the deadline (extended by two weeks to mid-April) through the new federal insurance marketplace operating in three dozen states, as well as people who enrolled in 14 state-run marketplaces.^1,2

As of this writing, eight million people have now signed up for health insurance through the exchanges. How will these numbers and, more important, the ACA as a whole affect the healthcare community? The answers range from very bad to very good depending on who replies. It is clear that ACA is a very complex piece of legislation that will continue to bring about sweeping changes for physicians as provisions go into effect. Here, we take a look at some of the prominent changes that will affect healthcare providers in 2014 and beyond.

Universal Coverage

One of the main goals of the ACA is to provide quality, affordable healthcare for all Americans with a requirement for all Americans to purchase healthcare insurance. In addition to the eight million individuals who purchased healthcare insurance through the marketplaces, there are two very large populations that add to the numbers of insured patients as a result of specific provisions of the ACA. One provision allows youth under age 26 to remain on their parents’ insurance plans whether they live in their parents’ home or not. Other provisions include the ban on the insurance industry practice of refusing to cover pre-existing conditions and the elimination of lifetime caps on healthcare coverage.

Data from the Commonwealth Fund Health Insurance Tracking Surveys of Young Adults, conducted in November 2011 and March 2013, showed that increasing numbers of young adults during that period became aware of, and took advantage of, the ACA’s requirement that health plans offering dependent coverage insure children through age 25. In March 2013, an estimated 15 million 19-to-25-year-olds — half this age group — had been on a parent’s health insurance policy in the prior 12 months, up from 13.7 million prior to November 2011. Of the 15 million young adults on a parent’s plan, an estimated 7.8 million likely would not have been eligible to enroll in that plan prior to the ACA.³

The tracking survey also suggested that as young adults ages 19 to 29 gained awareness of the new coverage options available in January 2014, they would eventually enroll in large numbers. However, the survey found that only 27 percent of 19-to-29- year-olds were aware of the marketplaces. Lack of awareness was lowest among those who were uninsured during the year and those with low to moderate incomes.3 As of March 1, 27 percent of the 7.1 million enrollees in the marketplaces were in the 18 to 35 age group.⁴

While there are no data on the number of individuals with pre-existing conditions that are now able to purchase insurance, the numbers are estimated to be in the millions. In fact, it is projected that as many as 30 million Americans are expected to gain health insurance through the ACA. The question is: Are more patients a good thing for doctors? Because the American healthcare infrastructure has had workforce shortages for decades, the influx of so many new patients could flood a delivery system that is already strained. According to a 2012 compilation of state workforce studies and reports, every state needs more physicians. And, there are shortages not just of primary care physicians (PCPs), but also of specialists.⁵

The ACA relies heavily on the concept of the patient-centered medical home model and free preventive care, both of which require enough PCPs to deliver services.5 Unfortunately, the nation’s physician population is approximately one-third PCPs and two-thirds specialists, which is widely agreed to be suboptimal.⁶ The projected PCP shortage is currently estimated at 8,000, and over the next decade it is projected to range from 20,400 to 45,000, even with the use of nurse practitioners and physician assistants.⁵

Compounding this problem is that many of the new health insurance plans, which are low-cost or free plans, have limited networks, so the in-network doctors could be burdened with more patients than they can handle.⁷ The good news is that the ACA has provisions to combat this problem. It provides grants and contracts to support primary care training, and encourages physician training in community-based settings to offset the greater orientation toward specialty care in hospital-based residency training.⁶

There are also a great number of provisions to increase the number of physicians in medically underserved areas. The ACA authorizes grants to increase training in geriatrics and behavioral health, and provides incentives for general surgeons who practice in medically underserved areas. It includes changes to the National Health Service Corps (a program of the Health Resources and Services Administration) that may expand the number of providers able to serve in shortage areas in exchange for loan repayment or scholarships. It authorizes programs that aim to increase the diversity of the physician workforce by encouraging underrepresented minorities to enter health profession education and supporting them in their studies. It provides training in rural areas to encourage physicians to practice there at the conclusion of their training. And, last, it includes provisions that are intended to reduce isolation and increase contact with colleagues such as continuing education programs for health providers in rural areas.6

One more way the law is designed to increase physicians is by improving existing care facilities and increasing the number of available jobs. The ACA has funded 190 construction and renovation projects at health centers, and will support more than 485 new construction and renovation projects at health centers with 245 completely new centers in the next year. These projects are estimated to serve almost four million people, creating nearly 19,000 new jobs, including positions staffing the new facilities.⁸

Medicare and Medicaid

According to a budget document from the Centers for Medicare and Medicaid Services (CMS), Medicare, Medicaid and Children’s Health Insurance Program (CHIP) will cover almost 116 million Americans in 2014. That equals approximately 37 percent of the nation’s total population and approximately 43 percent of the population that will have some kind of health insurance.⁹ The ACA seeks to make healthcare more accessible and safer for Medicare and Medicaid patients, and it provides many changes and incentive programs for healthcare providers to do so.

Shortage areas. To encourage physicians to treat Medicare patients in shortage areas such as rural communities, the ACA provides a 10 percent Medicare bonus payment for primary care physicians and general surgeons.10 It also requires increased Medicare and Medicaid payments in primary care, where there is a large and growing salary gap with specialists, and provides incentives to coordinate care and compensate for administrative duties that specialty physicians do not have.⁶

Medicaid expansion. For states that have agreed to expand their Medicaid program, the ACA increases Medicaid reimbursements to match Medicare rates for primary care services — an increase that is fully funded by the federal government.¹⁰ States that have expanded Medicaid include Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Iowa, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Rhode Island, Vermont, Washington and West Virginia. As of this writing, states still considering expanding Medicaid include Indiana, Missouri, Pennsylvania, Utah and Virginia.¹¹

Medicare Advantage. Until recently, CMS had announced that Medicare Advantage plans would see a rate cut of 1.9 percent. Medicare Advantage plans are typically paid more than their traditional counterparts, and the ACA sought to bring the cost of Medicare Advantage more closely in line with traditional Medicare. However, on April 7, CMS announced that it would instead increase the rate it pays Medicare Advantage plans by 0.4 percent in 2015 — a result of “various policy changes” and “new estimates,” according to Jonathan Blum, former CMS principal deputy administrator.¹²

Quality vs. Quantity. But, Medicare reimbursement under the ACA for hospitals now hinges upon “quality” rather than “quantity,” which many programs address.

READMISSION REDUCTION PROGRAM

Effective Oct. 1, 2012, a readmission reduction program was established to provide incentives for hospitals to implement strategies to reduce the number of costly and unnecessary hospital readmissions. CMS defines a readmission as “an admission to a subsection(d) hospital within 30 days of a discharge from the same or another subsection(d) hospital.” Subsection(d) hospitals, per the Social Security Act, include short-term inpatient acute care hospitals excluding critical access, psychiatric, rehabilitation, long-term care, children’s and cancer hospitals.

About 20 percent of Medicare patients are readmitted to a hospital within one month after discharge, which CMS considers excessive and an indicator of quality of care, or lack thereof. The incentives for reducing readmissions are escalating penalties that decrease a hospital’s payments from all of its Medicare cases. In 2012, if rates of readmission to a discharging or another inpatient prospective payment system (IPPS) hospital were deemed excessive, the hospital’s IPPS payments were decreased up to 1 percent for all Medicare payments. In October 2013, the penalty went up to 2 percent, and in October 2014, it will increase to 3 percent.

A hospital’s readmission ratio was determined based on the frequency of Medicare readmissions within 30 days for acute myocardial infarction, congestive heart failure and pneumonia for patients who were discharged from July 2008 through June 2011. CMS determined the excess readmission ratios for those three diagnoses based on a National Quality Forum endorsed methodology, which looked at three years of discharge data and at least 25 records for each condition. The ratio includes adjustments for clinical factors such as patient demographic attributes, comorbidities and patient frailty. In 2015, additional conditions/measures for the initial inpatient admission will be added to the current list of three and will likely include the MedPAC recommendations of chronic obstructive pulmonary disease, coronary artery bypass grafting and percutaneous transluminal coronary angioplasty procedures, and other vascular procedures.¹³

Since the implementation of the readmission reduction program, rates of readmission have fallen. From 2007 to 2011, the all-cause 30-day hospital readmission rate among Medicare fee-for-service beneficiaries was 19 percent. In 2012, that rate declined to 18.5 percent, and in the first eight months of 2013, it declined to 18 percent. This translates into an estimated 130,000 fewer hospital readmissions between January 2012 and August 2013.¹⁴

BUNDLED PAYMENTS FOR CARE IMPROVEMENT

The Bundled Payments for Care Improvement (BPCI) initiative is another method for increasing higher quality healthcare at a lower cost to Medicare. Under BPCI, organizations enter into payment arrangements that include financial and performance accountability for episodes of care. It comprises four broadly defined models of care that link payments for multiple services that beneficiaries receive during an episode of care. Model one includes an episode of care focused on the acute care inpatient hospitalization under which awardees agree to provide a standard discount to Medicare from the usual Part A hospital inpatient payments. Models two and three involve a retrospective bundled payment arrangement in which actual expenditures are reconciled against a target price for an episode of care. Model four involves a prospective bundled payment arrangement in which a lump sum payment is made to a provider for the entire episode of care. BPCI is a three-year initiative that began Jan. 31, 2013, to assess whether the models being tested actually achieve improved patient care and lower costs to Medicare.¹⁵

HOSPITAL VALUE–BASED PURCHASING PROGRAM

The ACA has also established the Hospital Value-Based Purchasing (VBP) program, which builds on earlier legislation — the 2003 Medicare Prescription Drug, Improvement and Modernization Act and the 2005 Deficit Reduction Act — that established a way for Medicare to pay hospitals for reporting on quality measures. The Hospital VBP rewards acute-care hospitals with incentive payments for the quality of care for Medicare patients based on how closely they follow best clinical practices and how well they enhance patients’ experiences of care.¹⁶

In 2013, 45 percent of a hospital’s score was based on how frequently it followed basic clinical standards of care such as removing urinary catheters from surgery patients within two days to decrease the chance of infections. Thirty percent of the score was based on how patients rated the way they felt they were treated¹⁴ in the hospital using the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey, the first national standardized, publicly reported survey of patients’ perspectives of hospital care. The HCAHPS survey asks discharged patients 27 questions about their recent hospital stay, 18 of which are core questions about critical aspects of patients’ hospital experiences (communication with nurses and doctors, responsiveness of hospital staff, cleanliness and quietness of the environment, pain management, communication about medicines, discharge information, overall rating, and whether they would recommend the hospital). The survey also includes four items to direct patients to relevant questions, three items to adjust for the mix of patients across hospitals, and two items that support congressionally-mandated reports. It is administered to a random sample of adult patients across medical conditions between 48 hours and six weeks after discharge, and it is not restricted to Medicare patients.¹⁷

To assess quality, Medicare looks not only at how hospitals score in comparison with each other, but also how much each improves from two years previously compared with other hospitals. A hospital is judged on whichever score is higher, so some hospitals with subpar quality rankings still get more money because they show vast improvement. The amount of a hospital’s bonuses and penalties will remain unclear until the start of the following fiscal year, because it depends on how much a hospital ultimately bills Medicare.

More hospitals received penalties than bonuses in 2013, the second year of the Hospital VBP, and the average penalty was steeper than it was in the first year. In 2013, Medicare raised payment rates to 1,231 hospitals. Another 1,451 hospitals were paid less for each Medicare patient they treated.¹⁶

PHYSICIAN QUALITY REPORTING SYSTEM

Beginning in 2015, the ACA requires all physicians to participate in the Physician Quality Reporting System (PQRS) that was a result of the Tax Relief and Health Care Act of 2006. The PQRS authorizes a financial incentive for eligible professionals. For 2013 and 2014, eligible professionals who satisfactorily report quality data in the 2013 PQRS program can qualify for an incentive equal to 0.5 percent of the total estimated Medicare Part B allowed charges for all covered professional services furnished during the applicable reporting period. In the case of a group practice participating in the group practice report option, that incentive is based on the total estimated Part B charges for all covered professional services furnished by the group practice. Eligible professionals who did not satisfactorily report quality data under PQRS 2013 are subject to a 1.5 percent payment reduction in 2015. For PQRS 2014, penalties will increase to 2 percent in 2016 and subsequent years.18 The 2014 PQRS program consists of 110 individual quality measures eligible for claims-based reporting.19 Reporting for the PQRS involves adding codes to the electronic or paper claim form that is submitted to Medicare.

ACCOUNTABLE CARE ORGANIZATIONS

Finally, accountable care organizations (ACOs) are yet another way to encourage healthcare providers to provide high-quality care to Medicare patients. An ACO is a network of doctors and hospitals that share responsibility for providing coordinated care to patients. The goal of coordinated care is to ensure that patients, especially the chronically ill, get the right care at the right time while avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds in both delivering high-quality care and spending healthcare dollars more wisely, it shares in the savings it achieves for the Medicare program. About four million Medicare beneficiaries (an estimated 14 percent of the U.S. population) are now in an ACO, and combined with the private sector, more than 428 hospitals have already signed up.

Providers in an ACO are jointly accountable for the health of patients, and they must seamlessly share information. Those who save money while also meeting quality targets keep a portion of the savings. Providers can choose to be at risk of losing money if they aim for a bigger reward, or they can enter the program with no risk. In addition, CMS created a second strategy known as the Pioneer Program for high-performing health systems to pocket more of the expected savings in exchange for taking on greater financial risk. If an ACO is unable to save money, it might have to shoulder the costs of investments made to improve care such as adding new nurse care managers, and it may also have to pay a penalty if it doesn’t meet performance and savings benchmarks. ACOs sponsored by physicians or rural providers, however, can apply to receive payments in advance to help them build the infrastructure necessary for coordinated care.²⁰

Electronic health records. A significant investment will be required of all healthcare providers to comply with the ACA’s requirement for the adoption of electronic health records (EHRs). The Health Information Technology for Economic and Clinical Health Act, part of the ACA, set the groundwork for healthcare reform. It provided $27 billion in Medicare and Medicaid incentive payments to go to doctors and hospitals that adopt electronic medical records under federally established guidelines. The legislation was passed to ensure that patients’ privacy is protected and to transform toward a more efficient and less expensive healthcare model.²¹ As of Jan. 1, all public and private healthcare providers and other eligible professionals must have adopted and demonstrated “meaningful use” (MU) of EHRs in order to maintain their existing Medicaid and Medicare reimbursement levels.

The Medicare EHR Incentive Program started in 2011 and will continue through 2016. The program was designed in three stages with increasing requirements and participation. Originally, all EPs needed to begin participating by meeting the stage-one requirements for a continuous 90-day period in their first year of MU and a full year in their second year of MU. After meeting the stage-one requirements, providers will then have to meet stage-two requirements for two full calendar years. However, for 2014 only, the reporting periods have been revised. Because of delays in the publication of regulations that require EHR vendors to upgrade their systems to meet certified technology criteria, all providers are required to demonstrate MU for only a 90-day EHR reporting period, regardless of what stage they’re in. But, the 90-day reporting period is different for those who are a first-time participant in the program or for those who began MU prior to 2014, as well as their EHR vendor’s readiness to meet the Office of the National Coordinator’s 2014 certification criteria. Those in their first year of reporting in 2014 can report on any 90-day period but need to report by July 3 and no later than Oct. 1. On the other hand, those who began reporting in earlier years must report on either the Jan. 1 through March 31 quarter, April 1 through June 30 quarter, July 1 through Sept. 30 period or Oct. 1 through Dec. 1 period.

First-year program participants are eligible to receive an incentive payment of $24,000. Those who report after July 3 are still eligible to receive the incentive payment, but they also will receive a 2015 program adjustment, which amounts to a 1 percent decrease in Medicare reimbursement for all claims submitted in 2015. However, if they do not report by Oct. 3, they will not receive an incentive payment and will still be penalized the 1 percent in 2015. EPs who do not successfully demonstrate MU will have a negative payment adjustment made to their Medicare reimbursement, which starts at 1 percent in 2015 and increases each year that an EP does not demonstrate MU for a maximum of 5 percent.22

To obtain the incentive bonus, providers must use a certified EHR product and demonstrate they have met all of CMS’ MU requirements.²¹ Meaningful use, as defined by HealthIT.gov, consists of using digital medical and health records to improve quality, safety, efficiency and reduce health disparities; engage patients and family; improve care coordination and population and public health; and maintain privacy and security of patient health information.²³ For calendar years 2011 through 2016, EPs who demonstrate MU of certified EHR technology can receive up to $44,000 over five years under the program. These bonuses are equal to 75 percent of the provider’s allowable Medicare charges during the reporting year, and are made based on the calendar year. The first calendar year’s payments are for only the 90-day reporting period, and subsequent years are for the entire calendar year.²²

Health Information Exchanges

Some of the incentives offered under the ACA encourage the implementation of other changes, including health information exchanges (HIEs). For example, BPCI provides incentives for hospitals and doctors to coordinate information exchanges to improve quality of care, reduce unnecessary services and decrease preventable errors. HIEs connect physicians and facilities, enabling collaboration on patient treatment through the exchange of EHRs.²⁴ While HIEs don’t replace provider-patient communication, they can greatly improve the completeness of patients’ records because past history, current medications and other information is jointly reviewed during visits.25

There are currently three forms of HIEs. The first, the directed exchange, is used by providers to securely send patient information such as laboratory orders and results, patient referrals or discharge summaries directly to another healthcare provider. The information is sent over the Internet in an encrypted, secure and reliable way among healthcare professionals who already know each other, and is commonly compared to sending a secure email. The second, the query-based exchange, is used by providers to search and discover accessible clinical sources on a patient. This type of plan is typically used when delivering unplanned care such as by emergency room physicians to adjust treatment plans or avoid adverse medication reactions or duplicate testing. And the third, the consumer-mediated exchange, provides patients with access to their health information similar to how they might manage their finances through online banking.²⁵

However, the value of electronically exchanging data relies upon the standardization of data. Once standardized, the data transferred can seamlessly integrate into the recipients’ EHRs. HIE organizations (HIOs) provide the capability to electronically move clinical information between disparate healthcare information systems while maintaining the meaning of the information being exchanged. They also provide the infrastructure for secondary use of clinical data for purposes such as public health, clinical, biomedical and consumer health information research, as well as institution and provider quality assessment and improvement. Most HIOs currently are regional health information organizations (RHIOs), which facilitate accessibility and exchange of health-related information on individuals for a specified, contiguous geographic area. They typically include a range of participating healthcare provider entities, as well as other health stakeholders such as payers, laboratories and public health departments, and they are often managed by a board of directors comprised of representatives from each participating organization.²⁶

There also is another HIE infrastructure being rolled out to comply with elements of the ACA that is powered by the open cloud by IBM and others. Using these open systems, healthcare organizations achieve compliance with the sharing provisions of the ACA while also complying with the security requirements of HIPAA and other regulations. It is forecasted that as much as 40 percent of storage in the cloud may be medical records-related in the near future.²⁷

Administrative Simplification

How physicians bill and are reimbursed is also addressed by the ACA. Section 1104 of the ACA, titled Administrative Simplification, has four goals: 1) it provides for standardization of electronic billing that may allow for the use of machine-readable cards to record payment and insurance information, similar to a credit card; 2) it determines patient financial responsibility at the point of care; 3) it minimizes paper billing or communications; and 4) it speeds up reimbursement for health services and monitors how quickly insurers are making payments.²⁸ Eligibility verification and claims status operating rules were required to be adopted by July 1, 2011, and effective by Jan. 1, 2013. Claims remittance/payment and electronic finds transfer operating rules were required to be adopted July 1, 2012, and effective Jan. 1, 2014. Other operating rules were required to be adopted by July 1, 2014, and must be effective by Jan. 1, 2016.29

However, even with these systems in place, the onus is still on the patient. If an insurance company won’t pay for a service or procedure, the patient still must pay the bill. And, with an influx of patients, healthcare providers may need to rethink how they charge patients and make sure patients understand they are responsible for whatever costs their insurance company will not cover. The ACA provides for “navigators” to help with these issues, but the insurance company can still deny claims.²⁸

Medical Networks

With the influx of more patients and new regulations that increase paperwork and the cost of treating patients due to the shift in value-based healthcare models, many physicians in private practice will need to shift to medical networks to pool their resources.¹⁹ Only about 40 percent of family doctors and pediatricians remain independent, according to the American Medical Association, and many feel that the increased costs of treating patients have been accelerated by the ACA.³⁰

The trend being seen these days is for groups of three to five doctors to work together and pool their resources to be more efficient. More doctors are able to see more patients, group according to several specialties and work together to improve their administration.²⁰

Also under the ACA, doctors with small private practices will be able to join together with other small businesses to purchase health insurance in the marketplaces, which provides them with greater bargaining power when shopping for health insurance for their employees.¹⁰

Malpractice Reform

Several provisions of the ACA will help to reduce healthcare spending. But, the cost of healthcare will continue to remain high. Indeed, healthcare in the U.S. costs two-and-a-half times more than most developed nations in the world, including European countries like France, Sweden and the United Kingdom. On a more global scale, U.S. healthcare costs now represent 17.6 percent of GDP.³¹ A contributing factor to these costs is malpractice litigation. In 2012, there were a total of 12,142 paid medical malpractice claims in the United States for a total of $3.6 billion in payouts, which averages to nearly $297,000 per paid claim.³²

Malpractice reform, often known as medical tort reform, has been tackled in a number of states, including California and Texas. But attempts at passing similar regulations on the federal level have failed since the 1970s. The ACA doesn’t include tort reform, per se, that would change the rules when patients sue their doctors for medical errors or malpractice.³³ However, the ACA does authorize $50 million in funding for state projects that develop, implement and evaluate alternatives to current tort litigation such as certificate of merit programs, which require a finding that a suit has merit before it can proceed to trial, and health courts, which would have cases heard by a panel of medical experts rather than a jury. Each state applying for funds can develop an alternative system, but that system must allow for the resolution of disputes and promote a reduction of healthcare errors by encouraging the collection and analysis of patient safety data related to disputes by organizations that engage in efforts to improve patient safety and the quality of healthcare.³⁴

Applications for grants were due Jan. 20, 2010. On July 11, 2010, HHS awarded $23 million in grant funding, including seven three-year demonstration projects and 13 one-year planning grants. The impact on physicians will be different in each state, depending on how the demonstration project is constructed. The American College of Physicians believes that each project selected for funding will be assessed according to its capacity for lowering liability insurance premiums and reducing the frequency and severity of malpractice claims without denying injured patients appropriate redress for physician negligence.³⁴

Good and Bad

While any new system will have both proponents and opponents, the implementation of the ACA has sparked debate about controversial issues. Its concepts are noble: providing health insurance to more individuals, making healthcare more affordable, removing some of the barriers and limits and providing better quality care. But, as the ACA continues mandating specific provisions through 2014, the healthcare profession will struggle to adapt to meet the demands of more patients with a shortage of physicians, increased paperwork to account for improved care quality, and potential cuts in reimbursement for Medicare and Medicaid if benchmarks aren’t met.